States’ rights advocates should want health exchanges

Texas Gov. Rick Perry says he doesn’t want his state to be “an appendage of the federal government when it comes to health care.”

So he, like a handful of other Republican governors, has publicly refused to set up an insurance exchange, as called for by the Patient Protection and Affordable Care Act.

All the governors in this group – including Nikki Haley of South Carolina, Bobby Jindal of Louisiana and Rick Scott of Florida – are states’ rights advocates. Yet if they don’t create the exchanges, they will bring about precisely what they oppose: a federal takeover of a major part of their states’ insurance systems. The federal government will come in and build an exchange for them, one that will be extremely difficult to tailor to local needs.

The exchanges are meant to provide private insurance options for families and small businesses. Even former Senate Majority Leader Bill Frist, a Republican who opposes most of the health care law, strongly endorses state health-insurance exchanges and is urging governors to set up their own. And Mike Leavitt, who was President George W. Bush’s secretary of health and human services and is now the leader of Mitt Romney’s transition team, is advising states on how to set up exchanges.

Nevertheless, along with the four governors who have publicly rejected exchanges, 15 more have not declared whether they will set them up.

Contrary to the notion that the exchanges would somehow act as instruments of federal control, states are allowed plenty of leeway to create systems that conform to local needs and values. The exchange that already exists in Utah, for example, primarily provides people with the information they need to help them choose an insurance plan. And Utah law explicitly prohibits any plan in the exchange from offering coverage for abortions. Massachusetts and Vermont, in contrast, impose stiff regulations on their insurance markets.

Presumably, states such as Texas and South Carolina, which lean toward less government regulation, would prefer an exchange like Utah’s to a Massachusetts-style system. But governors who choose not to create their own exchanges will pass up the chance to decide for themselves how large a regulatory role they want to play.

Even though the Health and Human Services Department staffers who are working on plans for the federally imposed exchanges are trying their best to get input from insurance officials in every state, they will be hard-pressed to design unique exchanges for each of the states that refuse to design their own. It’s more likely that the federally operated exchanges will have a one-size-fits-all quality. And this will make the states’ health-insurance systems more difficult and costly to administer.

One underpublicized function of health-insurance exchanges is to help people figure out which plans are available to them. Each one will need a mechanism to determine which people qualify for, and should be enrolled in, Medicaid or the Children’s Health Insurance Program. Since each state already has its own system of administering Medicaid and CHIP enrollment, it would be much more efficient if the same state agency could manage enrollment through the exchange.

States that have expressed resistance to creating exchanges have yet to come up with workable alternative ways to help people understand their choices. They will be under some pressure to do so – especially from the health-insurance industry, which has urged states to manage their own exchanges. In Texas alone, a state where 25 percent of residents are uninsured, about 2 million people would be eligible for health insurance in an exchange.

It’s not too late for any state to start building its own exchange. However, in order to do so, it must let the federal government know by Nov. 16 – and begin operation on Jan. 1, 2014. Some governors might understandably have philosophical or practical reasons for wanting to limit federal involvement in their health-insurance systems. In that case, they should quickly grab the opportunity to set up their own exchanges. •

Elena Marks is a lawyer and the former director of health and environmental policy for the city of Houston. This column was distributed by Bloomberg News.

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